Sacha’s Weblog

In what was probably Larry’s second hardest thing to go through (after losing against Alinghi during the finals of the 2003 Louis Vuitton Cup), ORCL finally joined the cloud reality.

Let’s go through the good, the bad and the ugly in what ORCL announced…

The Good

Larry has long been in denial about the cloud: this stance was not sustainable anymore. As a matter of fact, ORCL was the last major IT company to still resist the obvious: the cloud is here to stay – and it is thriving. If ORCL hadn’t changed course, they were truly facing a risk that their application, middleware and infrastructure businesses would be ripped apart by fast growing and much more agile SaaS, PaaS and IaaS vendors – and this in probably less than half a decade.

But Larry is a wise businessman and he certainly has no intent to lead his venerable company to the “elephants’ graveyard.” Consequently, ORCL made it clear today that they intend to play a significant role in the cloud at all levels: IaaS, PaaS and SaaS.

HP, Microsoft – and to a (much) lesser extent, IBM – had already laid out a cloud strategy and had started executing on it. ORCL was the last fortress to resist and their stance had probably been cited by a number of CIOs as an argument to justify their own resistance to the cloud. Those days are now over and all of the largest enterprise IT vendors have clearly sent the message that the cloud is the new platform. ORCL joining the fray is a greatly symbolic step forward for the cloud.

The Bad

The problem is that if you take a closer look at ORCL’s current cloud offering you’ll quickly realize that ORCL is not really moving into the cloud, it is more…moving the cloud into ORCL.

You want to pay as you go? You want elasticity? You want on-demand? Fine. ORCL’s current cloud offering is essentially a repackaged vertical stack of the good-old ORCL you’ve always known; they’ve simply made it possible to consume it in a cloudish way. We are still far away from the generic cloud infrastructure offering of an Amazon AWS, a true cloud platform à la CloudBees or a multi-tenant application offering à la Salesforce.com. Welcome [b|h]ack to the ASP model by the hour, welcome to 1996.

My gut tells me that ORCL’s customers won’t be satisfied with such a vertically-closed view of the cloud. ORCL will have to do better – much better. But it takes more than a snap of the fingers to move such a large ship towards a new paradigm, so let’s give ORCL some time, the benefit of the doubt and let’s see how they execute.

The Ugly

The reality is that despite ORCL’s efforts to enter the space, and independently of their technical offering, it will be very hard for ORCL to incentivize their sales force to drive any meaningful cloud sales.

In order to be successful, their cloud solution would have to be better, faster and cheaper than their current offerings.

ORCL’s offering, as we have seen, is currently no way better or faster: being a mere hosting offering of their current products, it doesn’t provide any meaningful value-add and it is unlikely to generate a gold rush-like stampede to ORCL’s cloud platform.

As for the cheaper part, I doubt ORCL will convert their very-high, per-CPU prices into marketplace give-aways just because the cloud is cool.

ORCL’s prices will either have to be compatible with their current pricing scheme and level – which means absolutely non-competitive with the cloud offerings out there – or aggressively priced, hence in complete competition with their own sales force.

The fundamental question for many entrenched software vendors trying to enter the cloud is how can they incent their sales force to move away from highly priced, multi-year upfront licenses deals, in favor of pay-as-you-go, pay-what-you-need, self-service offerings, in complete disruption of their current account-level or territory-based sales model. This will be hard to swallow and a tough selling transition to make.

Conclusion

As the last major IT vendor to commit to the cloud, ORCL closed the introductory chapter of its cloud story this week.

Ten years ago, it was less and less sustainable for companies not to have a clear open source strategy in order to i) protect their IP, and ii) increase their productivity. The exact same thing is true today with the cloud: now is the time to embrace the future.

Welcome to the cloud era, Oracle!

Onward,

Sacha

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